by John Waggoner, Bruce Horovitz and Gary Strauss, USA TODAY

by John Waggoner, Bruce Horovitz and Gary Strauss, USA TODAY

Pfizer's $100 billion bid for AstraZeneca, the biggest and latest in a series of proposed big pharma mergers, makes sense for both drugmakers, but likely won't get done unless the offer is sweetened, analysts say.

Word of a possible merger between the British-based maker of cholesterol medication Crestor and New York-based Pfizer - marketer of erectile dysfunction treatment Viagra - propelled shares of both companies Monday. Pfizer rose 4.2% to $32.04, while AstraZeneca surged 12.2% to $77.01.

"The deal makes sense because the two companies end up quite a bit stronger,'' says Seamus Fernandez, manager director for Leerink Partners Equity Research. "But at the existing price, this is clearly not going to happen.''

An earlier Pfizer bid was spurned in January.

The latest cash-and-stock offer, worth about $76.60 a share, was rejected over the weekend. AstraZeneca said in a statement Monday that the latest offer "very significantly undervalued AstraZeneca and its prospects."

AstraZeneca is undergoing a major research and development re-organization to offset expirations of drug patents. It's also been reducing costs and attempting to boost productivity of research programs.

Merger mania has been sweeping the drug industry at its strongest pace since 2009, as cash-rich companies face slowing sales and rising costs and as blockbuster medications with expiring patents face competition from cheaper generics.

Earlier this month, Valeant Pharmaceuticals offered to buy Allergan in a deal valued at more than $45 billion, while Novartis sold and exchanged business units with Eli Lilly and GlaxoSmithKline. And Mallinckrodt bought Questcor Pharmaceuticals for $5.6 billion. On Monday, Forest Laboratories - which has been offered $25 billion by Ireland's Actavis PLC - said it would offer up to $1.5 billion for Furiex Pharmaceuticals.

Pfizer said it is confident of a deal with AstraZeneca. "We believe patients all over the globe would benefit from our share commitment to R&D, which is critical to the future success of the pharmaceutical industry, in the form of potential new therapies that help to fight some of the world's most feared diseases, such as cancer," Pfizer said in a statement.

Fernandez says Pfizer may have to sweeten the deal by another 15% to win approval, pushing what's already among the biggest ever bids for a drugmaker to nearly $115 billion.

Aside from synergies and cost savings, there can also be huge tax breaks. A post-merger Pfizer would remain headquartered in New York, but would have a holding company based in Britain, where lower corporate taxes would save billions of dollars.

"The longer-term benefits you get reincorporating Pfizer in the United Kingdom and its tax system are considerable,'' Fernandez says.

Consumers aren't likely to see higher prices. "The biggest distributors don't have meaningful overlap to drive up prices,'' he says.

Still, some warn that suitors nearly always overpay for their targets.

"It goes through phases," says Sam Stovall, chief investment strategist for Standard and Poor's Capital IQ. At its highest points - as in the 1980s - companies seek to outdo each other in making massive purchases. "It really is keeping up with the Joneses," Stovall says.

At their best, deals can align a drugmaker's strengths with another's. At their worst, massive mergers become synonymous with failure, such as the disastrous AOL-Time Warner deal in 2000, which set an M&A record of $350 billion. The companies eventually separated.